Mo’ money, mo’ problems

Last week I shared the first principle of strategic budgeting with you: having conversations about money. I hope you took the opportunity to act on it over this last week, that you talked to a loved one about one thing you wanted, and made a realistic plan for how you could get it. If you haven’t yet, today’s your day to give it a shot!

These kinds of simple conversations may not seem like they’re of much importance when considered alone. But believe me, as I’ve looked back at the impact of the collection of these honest talks about money that Katie and I have had, it’s pretty awesome! By having frequent conversations about money, we’ve been able to discuss, plan, and execute on these major areas of our life in the last couple years:

We dropped $185k of debt

We saved up an emergency fund of 5 months of expenses

We’ve kicked off a down-payment fund that’s now at about $7,000

We started a retirement savings trajectory that should have us around $3 million in 35 years

We’ve ditched credit cards altogether

We went on our first family vacation (it was amazing!)

We easily got through an unexpected car repair by making a couple tweaks to our budget that month

And we’ve enjoyed a wealth of other blessings

I hadn’t actually created a list like this mentally or otherwise, but writing all this down right now, is really satisfying. We’ve made some serious progress!

Having conversations about our money was definitely a key to our success, but it wasn’t the only one. Today I want to tell you a bit about the 2nd principle of budgeting that’s helped us to do all this: spend every dollar with intention.

First, a quick story

Before Katie and I moved to California, we were making very little money, still accumulating debt, and drowning a bit with the cost of our new house. I never felt like we were spending irresponsibly, but looking back, we were definitely spending more than we had—and that was irresponsible.

Then I got this great job. The job required us to move all the way to California (boohoo right?) and was going to pay more than 2x as much as what I’d been making in Colorado. Funnily enough, when Katie and I were considering how much we’d want to make in order to uproot our family to California, Katie threw out a dollar amount that we both laughed at and thought was beyond what I could make. It turns out they offered me even more!

So we hastily packed up our entire life in a couple weeks, found someone to rent our house, and headed west to sunny California. We kinda felt like we’d made it—a great job, in a great part of the world, with all this extra money to spend!

Mo' money mo' problems

Well, we quickly got used to spending the full month’s salary—sometimes even before the month was over! But we weren’t buying big ticket items, going on vacations, or paying down a lot of debt, and we definitely weren’t saving any money.

Oddly enough, even though we had all this extra money at our disposal, we didn’t find ourselves any more satisfied. We were spending money on things that we presumably thought would improve our life, and yet we felt very little improvement.

Trying out something new

Then, as an experiment, we decided to spend as little as possible for 1 month. I’ll be straight up, it was really hard! But, it was also deeply satisfying. So satisfying in fact, that we decided to actually make a change in our life.

So, we talked about it (see principle 1) and decided that we weren’t going to spend money without a plan anymore. Instead, we were going to try what’s called zero-based budgeting. Here’s a good description of zero-based budgeting from Wikipedia:

Zero-based budgeting is an approach to planning and decision-making that reverses the working process of traditional budgeting. In traditional [budgeting], [participants] justify only variances versus past years, based on the assumption that the “baseline” is automatically approved. By contrast, in zero-based budgeting, every line item of the budget must be approved, rather than only changes. Zero-based budgeting requires the budget request be re-evaluated thoroughly, starting from the zero-base.

Yup, that meant no more set-it-and-forget-it budgets. No more categories of purchases that are supposed to be the same every month of the year. And no more assumptions that our “base” expenses are automatically approved. For us, it meant that each month we started with the total income we’d be bringing in for the month. Then we discussed and subtracted each thing we were going to buy that month until we eventually got to zero.

Now that may sound laborious to you—that’s because it was! We’d have to spend an hour or more every month having a big ‘ol budgeting meeting where we’d discuss everything. Each of us attempted to keep a list of things we wanted to buy, so we’d be able to remember everything during our budgeting meeting. It was hard work. And it was worth it.

You see, by doing this we became conscious. We woke up to the reality of our situation. We started to feel all the purchases we were making, and we started to see how they related to each other and to our overall goals.

Just to be clear, I’m not talking about the feeling you get when you open up mint.com to look back and see how you spent your money last month. I’ve done that too many times, and it never changed anything for me. No, what I’m talking about is looking forward, and deciding where you’re going to spend your money. This is where the magic happens.

When we stopped looking back, and stopped generalizing our spending, we were finally able to start looking forward with clarity. We were able to start really having control over our money, and subsequently, our life. Now, we were spending every dollar with intention.

In practice, spending every dollar with intention means money doesn’t get spent on accident. Do we sometimes save less than we hoped to? Absolutely. Do we do it on accident? No way! When we deviate from our original plan, it’s because we decide to, not because it “just happened”, or “something came up”, or even because “I just had to have it”.

What about all the fun?

But what about being spontaneous? It’s fun to do something unknown, without a plan, not knowing what’s gonna shake out. Early on we made the mistake of letting all this intention rob us of spontaneity. Our plans didn’t have any wiggle room or fun built in—and it sucked royally. After talking about it, we came up with a simple solution: we could just plan for spontaneity!

So now we have 4 spontaneity line items in our budget most months. One we use together for dates, another is just for Katie, I have one just for me, and finally there’s one for us to use for spontaneous generosity toward others.

A hidden benefit

The obvious benefit of spending with intention is that you get to decide in advance and control where each dollar of your money goes. But there’s at least one other hidden benefit too.

Remember earlier when I mentioned that we were spending all this new California money, but still feeling dissatisfied. Well, our favorite benefit of spending every dollar with intention is that we find satisfaction with our purchases. We no longer feel deprived. We no longer have to ask ourselves: “what do we have to show for all that money?”

We feel content with our situation, satisfied with our behavior, and fulfilled in our efforts.

How about you?

Stop for a moment and consider these questions:

Are you spending all your money with intention?

Are you telling your money where to go, or is your spending running your life?

Does your spending line up with your life’s priorities, goals, and intentions?

If you had anything besides an enthusiastic “yes!” to any of those questions, I want you to try out something new today. Let’s walk through it step by step:

Take the total amount of money you have to spend this coming week and put it on a piece of paper, or in a spreadsheet

Sit down with your loved one and decide together what you’re going to do with every dollar

Don’t let any accidents happen to you, you get to be in total control of your money this week

Before you spend anything, make sure it’s planned for, agreed upon, and that it’s intentional

Try it out, it’s only for a week! You’ll feel more fulfilled in your purchases as you act with greater intention—Katie and I have.

-Conor

P.S. If you haven’t already, you should share this newsletter with your spouse or significant other. You may have noticed that I’m constantly talking about “Katie and I”, or “we”, I do that because it’s the only way we’ve been able to be successful—we gotta work together.